Correlation Between Ternium SA and Algoma Steel

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Can any of the company-specific risk be diversified away by investing in both Ternium SA and Algoma Steel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ternium SA and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ternium SA ADR and Algoma Steel Group, you can compare the effects of market volatilities on Ternium SA and Algoma Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ternium SA with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and Algoma Steel.

Diversification Opportunities for Ternium SA and Algoma Steel

TerniumAlgomaDiversified AwayTerniumAlgomaDiversified Away100%
0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ternium and Algoma is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group and Ternium SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ternium SA ADR are associated (or correlated) with Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of Ternium SA i.e., Ternium SA and Algoma Steel go up and down completely randomly.

Pair Corralation between Ternium SA and Algoma Steel

Allowing for the 90-day total investment horizon Ternium SA ADR is expected to generate 0.31 times more return on investment than Algoma Steel. However, Ternium SA ADR is 3.2 times less risky than Algoma Steel. It trades about -0.09 of its potential returns per unit of risk. Algoma Steel Group is currently generating about -0.18 per unit of risk. If you would invest  3,255  in Ternium SA ADR on November 26, 2024 and sell it today you would lose (316.00) from holding Ternium SA ADR or give up 9.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ternium SA ADR  vs.  Algoma Steel Group

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -40-30-20-10010
JavaScript chart by amCharts 3.21.15TX ASTLW
       Timeline  
Ternium SA ADR 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ternium SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb28293031323334
Algoma Steel Group 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.21.41.61.822.2

Ternium SA and Algoma Steel Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.01-2.27-1.53-0.79-0.05020.641.322.012.693.38 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15TX ASTLW
       Returns  

Pair Trading with Ternium SA and Algoma Steel

The main advantage of trading using opposite Ternium SA and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ternium SA position performs unexpectedly, Algoma Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Algoma Steel will offset losses from the drop in Algoma Steel's long position.
The idea behind Ternium SA ADR and Algoma Steel Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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